Harrison in his capacity as Trustee of the property of Beck, a Bankrupt v Beck
[2021] FedCFamC2G 59
•21 SEPTEMBER 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)Harrison in his capacity as Trustee of the property of Beck, a Bankrupt v Beck [2021] FedCFamC2G 59
File number: SYG 1247 of 2021 Judgment of: JUDGE CAMERON Date of judgment: 21 September 2021 Catchwords: PRACTICE & PROCEDURE – Application for leave to dispense with service on respondent – where contact with the respondent lost – adequate enquiries and attempts to contact the respondent made by the applicant – service impracticable.
BANKRUPTCY – Release of trustee under s.183 of the Bankruptcy Act 1966 (Cth) – relevant considerations.
BANKRUPTCY – Trustee’s remuneration – trustee’s application for a remuneration determination – application misconceived.
BANKRUPTCY – Trustee’s expenses – reimbursement from estate – no reimbursement for expenses of trustee’s misconceived application to the Court.
Legislation: Bankruptcy Act 1966 (Cth), ss.6D, 30, 140, 153A, 183, 184, 254
Federal Circuit and Family Court of Australia Act 2021 (Cth), ss.8, 10
Federal Circuit Court (Bankruptcy Rules) 2016 (Cth), r.8.02
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth), r.8.02
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), r.6.14
Insolvency Practice Rules (Bankruptcy) 2016 Cth, ss.60-5, 60-10, 60-15, 90-15, 90-20
Cases cited: Re Ladyman (a debtor) (1981) 38 ALR 631
Adsett v Berlouis (1992) 37 FCR 201
Pattison v Bellin (2000) 103 FCR 590
Doolan v Dare (2005) 142 FCR 287
Re Macryannis (2010) ABC(NS) 407
Re Walker (2005) 189 FLR 467
Pattison (Trustee), In the matter of Bellin (Bankrupt) v Bellin (No 2) [2000] FCA 1268
Hacker v Weston (No 2) [2015] FCA 521
Donnelly v Maxwell-Smith [2010] FCAFC 154
Division: General Division Number of paragraphs: 37 Date of hearing: 26 August 2021 Counsel for the Applicant: Mr B.J. Skinner Solicitor for the Applicant: Church & Grace Counsel for the Respondent: No appearance by or on behalf of the respondent ORDERS
SYG 1247 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: BRETT RICHARD GEOFFREY HARRISON IN HIS CAPACITY AS TRUSTEE OF THE PROPERTY OF MARIANNE ROSE BECK
Applicant
AND: MARIANNE ROSE BECK
Respondent
ORDER MADE BY:
JUDGE CAMERON
DATE OF ORDER:
21 SEPTEMBER 2021
THE COURT ORDERS THAT:
1.Service on the respondent be dispensed with.
2.The application for approval of additional remuneration of the applicant be dismissed.
3.The costs of this proceeding, other than the costs of and incidental to the application for approval of additional remuneration of the applicant, be part of the costs of the applicant's administration of the respondent’s estate.
4.After deduction of his expenses and remuneration, the applicant deal with all surplus moneys in accordance with s.254(2) of the Bankruptcy Act 1966 (Cth) and reg.72 of the Bankruptcy Regulations 2021 (Cth).
5.Upon him finalising the bankruptcy administration of the respondent’s estate in accordance with these orders, the applicant be released from the trusteeship of that estate in accordance with section 183(1) of the Bankruptcy Act 1966 (Cth).
6.The applicant have leave to apply within 28 days to make submissions in relation to the order that the costs of and incidental to the application for approval of additional remuneration of the applicant not be part of the costs of the applicant's administration of the respondent’s estate.
THE COURT DECLARES THAT:
1.Upon the payment of the surplus moneys in accordance with order 4, the applicant shall be at liberty to annul the bankruptcy by force of s.153A of the Bankruptcy Act 1966 (Cth).
Note: The form of the order is subject to the entry in the Court’s records.
REASONS FOR JUDGMENT
JUDGE CAMERON
INTRODUCTION
The applicant, is the trustee (“Trustee”) of the bankrupt estate of Marianne Rose Beck. On 5 July 2021 he filed an application under s.183 of the Bankruptcy Act 1966 (Cth) (“Act”) seeking the following relief:
1.Order that service on the named respondent be dispensed with on the ground that her present whereabouts are unknown.
2.Declaration that pursuant to section 153A(1), upon the Trustee being satisfied that all the Bankrupts [sic] debts have been paid in full, the bankruptcy be annulled.
3.An order that the costs of this Application shall be part of the costs of the Trustee's administration.
4.An order that the remuneration of the Trustee be approved by the Court in the sum of $93,714.47 (excluding GST).
5.The Applicant is to make payment of any surplus funds to the Australian Financial Security Authority or such other person or entity as the Court may determine after deduction of the Trustee's expenses and remuneration.
6.Upon the Applicant finalising the bankruptcy administration of the Respondent in accordance with paragraphs 1 to 4, the Applicant be released from the Trusteeship of the Estate in accordance with section 183(1) of the Bankruptcy Act 1966.
The matter was listed for directions on 5 August 2021 at which time it was adjourned to 26 August 2021. During the adjournment the Trustee filed material additional to that filed with the initiating application.
EVIDENCE
Filed in support of the present application have been:
(a) the Trustee’s affidavit sworn 2 July 2021 giving a history of the administration;
(b)an affidavit of service of the Trustee’s solicitor, Mr Pignone, sworn 26 July 2021 concerning correspondence he had had with the Australian Financial Security Authority (“AFSA”) in relation to this proceeding;
(c)the Trustee’s affidavit sworn 24 August 2021 in which he refers to his records of the administration of the respondent’s estate;
(d)Mr Pignone’s affidavit sworn 24 August 2021 in which he deposes to unsuccessful attempts in the recent past to make contact with respondent;
(e)AFSA’s response to Mr Pignone’s correspondence – Ex A1;
(f)documents referred to in the Trustee’s affidavit sworn 2 July 2021 as exhibit “BH1” – Ex A2; and
(g)documents referred to in the Trustee’s affidavit sworn 24 August 2021 as exhibit “BH2” – Ex A3.
In broad terms, the history of the administration as revealed by the evidence indicates that the Trustee dealt with:
(a)a property of which the bankrupt was part owner, the other owner being the estate of her deceased mother, of which the bankrupt was a beneficiary (“Property”);
(b)a dispute in the Supreme Court of New South Wales in relation to the nature of the bankrupt’s interest in the Property;
(c)(issues concerning the grant of probate or letters of administration in relation to the deceased estate;
(d)consideration of an appeal against the orders sequestrating the bankrupt’s estate;
(e)implicitly, negotiations with the administrator of the deceased estate in relation to the sale of the Property; and
(f)proofs of debt and the payment of creditors.
LEGISLATION
Section 183 of the Act relevantly provides:
183 Release of registered trustee by the Court
(1)A trustee may apply to the Court for an order of release from the trusteeship of an estate.
(2)Where the Court is satisfied that the trustee:
(a)has realized all the property of the bankrupt or so much of it as can be realized without unduly protracting the trusteeship or has distributed a final dividend;
…
the Court may make the order sought.
(3)In hearing the application, the Court must also consider any objection to the order sought that is made by the Inspector-General, the Official Receiver, a creditor or any other interested person.
(4) An order of release under this section:
(a)discharges the trustee from all liability in respect of any act done or default made by him or her in the administration of the estate of the bankrupt; and
(b)if the trustee has not already resigned or been removed from office, operates to remove him or her from office.
…
At the time this proceeding was commenced, r.8.02 of the Federal Circuit Court (Bankruptcy Rules) 2016 (Cth) (“FCC Bankruptcy Rules”) relevantly provided:
8.02 Resignation or release of trustee
(1) This rule applies to the following applications:
…
(b)an application under subsection 183(1) of the Bankruptcy Act for the release of a trustee from the trusteeship of an estate.
(2)The application must be accompanied by an affidavit stating the grounds in support of the application.
(3)For an application referred to in paragraph (1)(b), the following must be attached to the affidavit:
(a)a statement giving details of the realisation of the bankrupt’s property and the distribution of the estate by the trustee;
(b)a copy of the books referred to in section 70-10 of Schedule 2 to the Bankruptcy Act in relation to the estate.
(4) The application and supporting affidavit must be served on:
(a) the Official Receiver; and
(b the bankrupt; and
(c) anyone else (including a creditor) as ordered by the Court.
…
(6)Within 2 days after the order is entered, the trustee must give a copy of the entered order to the Official Receiver.
In the period since the proceeding was commenced the Court has been renamed the Federal Circuit and Family Court of Australia (Division 2): ss.8(2), 10 Federal Circuit and Family Court of Australia Act 2021 (Cth), and the FCC Bankruptcy Rules have been repealed and replaced with the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (“FCFCOADiv2 Bankruptcy Rules”). Rule 8.02 of the FCFCOADiv2 Bankruptcy Rules is not relevantly different from r.8.02 of the FCC Bankruptcy Rules.
ISSUES
Service on the respondent
Rule 6.14(1) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) provides:
6.14 Substituted service
(1)If, for any reason, it is impracticable to serve a document in a way required under this Part, the Court may make an order dispensing with service or substituting another way of serving the document.
The Trustee deposed in his affidavit sworn 2 July 2021 that he had lost contact with the respondent and had not been able to locate her despite instructing enquiries. In his second affidavit, sworn 24 August 2021, Mr Pignone deposed to the further efforts made to make contact with the respondent following the adjournment of the matter on 5 August 2021. Various enquiries were undertaken, most importantly with the respondent’s son. Mr Pignone’s affidavit satisfies me that he exchanged emails with the respondent’s son and that he sent the respondent’s son copies of the present application, the Trustee’s affidavit of 2 July 2021 and the documents that are Ex.A1. The email sending those documents to the respondent’s son advised of the listing of this matter on 26 August 2021.
On 26 August 2021, the respondent did not appear when the matter was called on. Mr Pignone had deposed that he could not be sure whether or not the respondent’s son had forwarded to his mother the material that had been sent to him. Be that as it may, it is appropriate to state at this point that I am satisfied that in the very recent past the Trustee has made adequate enquiries and attempts to contact the respondent, that service has proved to be impracticable and that there would be no point in adjourning the matter so that further attempts, including substituted service, might be made. That being so there will be an order that service on the respondent be dispensed with.
The Trustee’s remuneration be approved in the total sum of $93,714.47 (excluding GST).
The Trustee deposed in his 2 July 2021 affidavit that creditors had approved him drawing fees to an upper limit of $62,000 (exclusive of GST) and that, following the payment in full of all creditors’ claims in March 2017, the Inspector-General in Bankruptcy (“Inspector-General”) had approved additional remuneration of $15,714.47 in October 2017 and a further $6,000 in January 2020 to an upper limit of $83,714.47 (excluding GST). At the time of swearing that affidavit, the Trustee had drawn remuneration totalling $81,669.40 (excluding GST).
The Trustee also deposed that his administration of the respondent’s estate had been affected by factors including:
(a)A lack of cooperation from the bankrupt;
(b)Complicated creditor claims;
(c)Court application by the Respondent to have the bankruptcy annulled;
(d)Unsubstantiated complaints by the Respondent regarding administration of the Bankrupt Estate;
(e)Administration of the Deceased Estate of the Respondent's mother;
(f)Dealing with the Respondent's family law practitioner Nikolovski Lawyers;
(g)Dealing with the Respondent regarding the Deed of Release and the Respondent's complaint to AFSA regarding the Deed of Release;
(h)Attempts to locate the Respondent;
(i)Application to the Court for release under section 183A of the Bankruptcy Act.
I accept that evidence.
The present application seeks approval of further fees of $10,000, which would bring the total of approved fees to $93,714.47 (excluding GST). In that regard the Trustee has further deposed in his 2 July 2021 affidavit:
… I have undertaken a proper assessment of remuneration disbursements claimed to date in this matter, in accordance with the legislative requirements and applicable professional standards and I am satisfied that the amounts claimed are necessary and proper.
However, although he has identified the various tasks that the administration of an estate involves, and the bases on which his further fees would be raised, the Trustee has not identified what particular work remains to be done or by whom from his office and why the sum sought is reasonable and appropriate.
Nevertheless, a more significant issue presents itself. It arises out of the fact that although under the general law a trustee has the right to be reimbursed or indemnified in respect of costs and expenses properly incurred in administering the trust, the trustee has no general law right to remuneration. Trustees in bankruptcy do have an entitlement to remuneration but it is provided by the Act: Re Ladyman (a debtor) (1981) 38 ALR 631 at 643; Adsett v Berlouis (1992) 37 FCR 201 at 210, and regulated by the Act. Provision for remuneration is presently found in sch.2 to the Act, the Insolvency Practice Schedule (Bankruptcy) (“Schedule”). Section 60-5 of the Schedule provides in that regard:
60-5 Trustee’s remuneration
Remuneration in accordance with remuneration determinations
(1)The trustee of a regulated debtor’s estate is entitled to receive remuneration for necessary work properly performed by the trustee in relation to the administration of the regulated debtor’s estate, in accordance with the remuneration determinations (if any) for the trustee (see sections 60-10 and 60-11).
Remuneration for trustees if no remuneration determination made
(2)If no remuneration determination is made in relation to necessary work properly performed by a trustee in relation to the administration of the regulated debtor’s estate, the trustee is entitled to receive reasonable remuneration for the work. However, that remuneration must not exceed the maximum default amount.
…
“Remuneration determination” is defined in s.5-5 as a determination made:
(a) under section 60-10 or 60-11 in relation to the trustee; and
(b) in accordance with section 60-12.
Section 60-10 provides that a remuneration determination may be made by a resolution of creditors or by a committee of inspection. Section 60-11 provides that the Inspector-General may, in the circumstances prescribed by the Insolvency Practice Rules (Bankruptcy) 2016 (Cth), relevantly ss.60-5, 60-10 and 60-15, make a remuneration determination. Those rules set out the circumstances in which the Inspector-General may determine remuneration, the method by which a trustee may apply for a remuneration determination and the matters to which the Inspector-General must have regard when making a remuneration determination.
Should s.60-5(2) of the Schedule apply, in that no remuneration determination is made in relation to necessary work properly performed by a trustee in relation to the administration of an estate, the trustee may be remunerated up to the “maximum default amount” calculated in accordance with s.60-15.
The Trustee submitted that the Court had power to make an order for his remuneration. This was said to be provided either by s.30 of the Act, which relevantly provides:
30 General powers of Courts in bankruptcy
(1) The Court:
(a)has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
(b)may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter,
or by s.90-15 of the Schedule which relevantly provides:
90-15 Court may make orders in relation to estate administration
Court may make orders
(1)The Court may make such orders as it thinks fit in relation to the administration of a regulated debtor’s estate.
Orders on own initiative or on application
(2) The Court may exercise the power under subsection (1):
(a) on its own initiative, during proceedings before the Court; or
(b) on application under section 90-20.
Examples of orders that may be made
(3)Without limiting subsection (1), those orders may include any one or more of the following:
(a)an order determining any question arising in the administration of the estate;
…
(f)an order in relation to remuneration, including an order requiring a person to repay to the estate of a regulated debtor, or the creditors of a regulated debtor, remuneration paid to the person as trustee.
Whether a court exercising jurisdiction under the Act has power to make orders in respect of a trustee’s remuneration was considered in Pattison v Bellin (2000) 103 FCR 590 at 598 [32], 599 [378], Doolan v Dare (2005) 142 FCR 287 at 292 [19]-[21] and Re Macryannis (2010) ABC(NS) 407 at 442-447 [146]-[167], by reference to the provisions of the Act as it stood at the material times, to the effect that although the court could resolve disputes regarding the remuneration of a trustee, it had no power itself to fix that remuneration. In Re Macryannis Stone J noted at 447 [165] that in Re Walker (2005) 189 FLR 467 Barrett J had held, in the analogous situation of a liquidator’s remuneration, that:
The cases show that where the prescribed statutory mechanism for deciding quantum proves unworkable in practice, the court’s general power (also statutory) to determine any question arising in the particular administration extends to deciding the question of quantification. (at 477 [31])
Justice Stone went on to say:
In this case I see no reason why the Court should have resort to general powers such as are provided in s 30(1)(b) or to s 178(1). While I do not exclude the possibility that there may be circumstances in which those powers might be used, in my view the structure of the legislation that applies to the present claim contemplates that the Trustee will follow the procedures laid down in the Act and regulations. It is not for the Court to adopt some other procedure when the statutory procedure is open to the Trustee. (at 477 [167])
Similar considerations apply to this case, notwithstanding that relevant parts of the Act have been amended substantially since Re Macryannis was decided. The Schedule provides a clear mechanism by which the Trustee may seek further remuneration and states equally clearly in s.60-5(1) that that is what should be used in the present circumstances. Resort to the Court is to be reserved for the resolution of difficulties that may arise from doing so.
Moreover, the Schedule makes no provision for a trustee to seek “an order in relation to remuneration”. Although s.90-15 of the Schedule, to which the Trustee has referred, does empower the Court to make for “an order in relation to remuneration”, other than on its own motion it may only do so upon application under s.90-20 of the Schedule. That section relevantly provides:
90-20 Application for Court order
(1)Each of the following persons may apply for an order under section 90-15:
(a) a person with a financial interest in the administration of the regulated debtor’s estate;
(b) if the committee of inspection (if any) so resolves—a creditor, on behalf of the committee;
(c) the Inspector-General.
The Trustee is not, therefore, a person who may apply to the Court for “an order in relation to [his] remuneration” under s.90-15 of the Schedule.
Consequently, the Trustee’s application to the Court for a remuneration determination was misconceived and should have been made to the Inspector-General instead. It will be refused on that basis.
Release under s.183 of the Bankruptcy Act
Debts paid in full – s.183(2)(a)
The Court was told on 26 August 2021 that all the estate’s creditors have been paid, which I accept having regard to the “Trustee’s Account of Receipts and Payments” document which is included in Ex.A2, I note that those accounts record that a dividend of 100 cents in the dollar has been declared and that there is a surplus of funds.
Objections to order sought – s.183(3)
As noted earlier in these reasons, there is evidence that AFSA was notified of the present application. That evidence is contained in Mr Pignone’s affidavit sworn on 26 July 2021. Exhibit A1 is a copy of AFSA’s response dated 28 July 2021, noting receipt of the Trustee’s notification and advising that the authority did not intend to appear. That letter also canvassed the process by which surplus funds could be paid to the Commonwealth pursuant to s.254 of the Act, a section that is concerned with the payment to the Commonwealth of funds in a sequestrated estate that are, relevantly, unclaimed or undistributed.
Rule 8.02
Page 251 of Ex.A2 is a copy of the completed “Trustee’s Account of Receipts and Payments” form under ss.6D and 140(8) of the Act, filed in satisfaction of r.8.02(3)(a) of the FCFCOADiv2 Bankruptcy Rules. Exhibit A3 was filed in satisfaction of r.8.02(3)(b). To the extent that r.8.02(4) has not been complied with - because the Trustee’s records of the administration of the respondent’s estate were not, it would appear, served on the Official Receiver - I dispense with that requirement as AFSA’s letter responding to the advice of this proceeding gives no reason to suspect that the failure to serve those documents was of any concern to it.
Other considerations
In his affidavit of 2 July 2021, the Trustee deposed:
50.Subsequent to payment of dividends to creditors it became apparent to me that Ms Beck was dissatisfied with my conduct in the administration. I was concerned that the Respondent would seek to agitate further action and/or indeed commence proceedings if I finalised the administration.
51.As a consequence of the above, I instructed Church & Grace to draft a Deed of Release between myself and the Respondent. A copy of that Deed is at pages 191 to 197 of BH1.
52.I corresponded with the Respondent and others representing her regarding the finalisation of the administration and in particular my desire to have the Respondent execute a Deed of Release. At pages 198 to 239 of BH1 are copies of various communications by email and otherwise which contains communications in respect of the Respondent's apparent concerns about my conduct in dealing with her bankruptcy administration and my requirement that I would not finalise the administration until the Respondent signed a Deed of Release. Also at pages 240 to 246 of BH1 is a letter from AFSA responding to the Respondent's express concerns about my requiring that she execute a Deed of Release. Ultimately AFSA took the view that I was not acting unreasonably in requiring that the Respondent execute a Deed of Release in the circumstances of this administration.
53.I have lost contact with the Respondent. …
Conclusion
In all the circumstances, particularly as all the creditors have been paid, because there is a surplus of funds and the Trustee cannot secure a release from the respondent, it is appropriate and necessary that the Court grant his application for release under s.183 of the Act. There will be an order accordingly.
Costs of this application be costs in the administration
Costs by reference to discrete issues
The application for costs poses two questions: whether the Trustee should be awarded the costs he incurred in this proceeding and whether any costs awarded should be reimbursed by the estate. Further, there were two principal issues in this proceeding and, for reasons that will become apparent, the costs questions should be considered by reference to them. The first of those issues concerned the Trustee’s unsuccessful application for a remuneration determination. The second concerned the application under s.183 of the Act and the issues related to that relief, the payment of surplus funds and the annulment of the bankruptcy.
Authorities
In Pattison (Trustee), In the matter of Bellin (Bankrupt) v Bellin (No 2) [2000] FCA 1268 Goldberg J said:
As a general rule, a trustee in bankruptcy, so long as he or she acts reasonably, is entitled to an indemnity in respect of his or her costs in bringing any proceeding before the court: Adsett v Berlouis (1992) 37 FCR 201. In that case, the Full Court of the Federal Court rejected the submission that a trustee in bankruptcy should only be deprived of the right to recover his or her costs from the bankrupt estate when he or she has recklessly instituted or precipitated litigation. Consistently with the principles analysed in that case I consider that it is an appropriate exercise of discretion to disallow part of a trustee in bankruptcy’s costs where proceedings have either been misconceived or have resulted in the unnecessary incurring of costs. … (at [9])
In Adsett v Berlouis it had been said by the Full Court of the Federal Court that a trustee was entitled to be reimbursed for expenses prudently and reasonably incurred in the discharge of the trustee's proper duties, but not for expenses unreasonably or unnecessarily incurred. Their Honours continued:
In principle, there is no difference in the approach to be taken when the questions of the trustee's right to indemnity and right to remuneration fall for consideration. That is, the trustee’s right to remuneration is limited to work properly undertaken. In this context, “properly” means work reasonably and bona fide undertaken for the purpose of administering the estate or performing any public duty imposed by the Act, conformably with the trustee's duty to perform the work with reasonable care and skill and in an efficient and economical way.
Discussion
In Pattison v Bellin (No 2) Goldberg J held that an application for approval of a trustee’s remuneration concerned the determination of an entitlement and could be claimed against the bankrupt estate. That particular issue does not arise in this case because the Trustee was unsuccessful in his pursuit of a remuneration determination. Moreover, in circumstances where there was a statutory procedure open to the Trustee, indeed one he had already employed, the application to the Court was, to the extent that it sought a remuneration determination, misconceived and the Trustee should not be awarded costs in respect of it: Hacker v Weston (No 2) [2015] FCA 521 at [10]. It should also be made clear that the Trustee is not entitled to recover from, or retain out of the estate of the respondent any costs, charges and expenses incurred in relation to that aspect of the application: Donnelly v Maxwell-Smith [2010] FCAFC 154 at [22]-[24]; Pattison v Bellin (No 2) at [11]. I do appreciate, however, that that aspect of this issue was not the subject of submissions and consequently the Trustee will have leave to apply in relation to it. Any cognate remuneration issues are matters for the Inspector-General: see Pattison v Bellin at 599 [39].
The application for an order under s.183 of the Act is a different matter. The respondent was made bankrupt on 19 December 2014 and on 12 July 2016, the Trustee wrote to her advising that all proved debts had been paid. In that letter he raised the possibility that if the respondent gave a release to the Trustee by way of a deed, the bankruptcy could be annulled and she could take over dealing with the administrator of her late mother’s estate, thereby saving further administration costs. The respondent replied by letter dated 6 September 2016 raising various complaints as matters to be resolved before the “matter can be finalised”. On 13 September 2016 the Trustee replied:
I am keen to finalise your bankruptcy without incurring any further significant costs. My letter of 12 July sought your co-operation in moving towards this outcome. I proposed having a deed drawn up by my solicitor for your execution.
Your letter of 6 September seeks to agitate issues which in my view have been dealt with previously. You have also sought to again raise issues which were dealt with by His Honour, Justice Altobelli in his reasons for decision.
I have previously provided you with an accounting for the receipts and payments for the administration of the bankruptcy.
As I indicated in my July letter the issues that are currently outstanding can be properly dealt with by you and the administrator of the deceased estate. Those matters do not require my involvement.
I will instruct my solicitor to prepare an appropriate deed. I will forward same to you. Upon return of a signed copy of the deed, I will finalise the bankruptcy, file a notice of annulment of the bankruptcy and remit surplus funds to you.
The Trustee sent a draft deed of release to the respondent under cover of his letter dated 30 September 2016.The respondent replied by letter dated 10 October 2016 raising matters that she considered required attention.On 16 March 2017 the respondent wrote by email to the Trustee complaining about his administration of her estate and stating that the proposed deed of release:
… is not going to be signed because of illegality.
The Trustee replied by email on 10 April 2017 responding to the issues the respondent had raised, saying:
I have been attempting to finalise the administration for some time so that you, in your own right, could deal with issues in the administration of your mother's estate.
As you are aware I have raised a number of issues with the administrator of the deceased estate that I believe give rise to an adjustment in your favour from funds held in the deceased estate.
If I have to continue the administration of your bankruptcy in order to deal with these issues then the costs of the administration will increase thereby reducing surplus funds ultimately available to you.
I am concerned that you will continue to engage me in issues relating to pre-bankruptcy matters which are not for me to deal with.
It is for this reason that I have requested that you execute the Deed. I am not going to be placed in a position where I have annulled the bankruptcy and remitted surplus funds to you and remaining assets have re-vested in you and then have to deal with ongoing correspondence and incur further time charges with no prospect of recovery.
The Trustee wrote again to the respondent on 12 October 2017 advising that AFSA had advised him that it had concluded that the request that she execute the deed of release was not unreasonable in the circumstances. He enclosed a further copy of the deed saying that once it was executed and returned he could proceed to finalise the administration, annul the bankruptcy and remit surplus funds to her. In subsequent correspondence dated 18 September 2017, AFSA advised the respondent:
…
1.…
From my communications with the Trustee, the Trustee has stated that given the ongoing issues [raised by the respondent] including (but possibly not limited to) the above, the Trustee does not wish to be placed in a position of having to deal with those issues (which may reasonably include a potential review) post-annulment, when the Trustee cannot rely on an indemnity from the assets of the bankrupt estate. It is the Trustee’s position that outstanding issues you have regarding the administration appropriately be dealt with prior to annulment, in line with the Court’s decision in Bellin v Pattison referred to above. On this basis, I find it is not unreasonable that the Trustee, absent an assurance from you, will not annul the bankruptcy.
…
2.The Trustee's reasons for insisting on the Deed also include potential litigation that may be commenced post-annulment, when the Trustee would not be able to claim an indemnity from the assets of the bankrupt estate. The Trustee has sighted verbal intimation of litigation from your son Mr Aaron Beck and in light of your complaints history with the Trustee; the number of legal actions brought during the administration; and your apparent intention to take legal action or initiate a future review, as expressed in your Form, the Trustee's reasons in this regard do not seem unreasonable.
…
No further correspondence was cited by the Trustee and it seems that he lost contact with the respondent at some subsequent point.
I accept, in circumstances where the respondent has intimated the possibility of future litigation over the Trustee’s administration of her estate, that it was not unreasonable of him to seek from her a release by deed and, failing agreement, to seek release under s.183 of the Act. Essentially the same position had been taken by the trustee in Pattison v Bellin and it attracted no criticism from Goldberg J. Those considerations support an order for costs in the Trustee’s favour in respect of that part of the proceeding. Although an application under s.183 of the Act for release from potential liability might be seen as a private concern of the Trustee and a cost of doing business, a submission to similar effect was made in Hacker v Weston (No 2) and rejected by Flick J. His Honour ordered that the applicant trustee’s costs of that application be costs in the administration of the estate. On balance I conclude that the order sought under s.183 of the Act, and the related orders, do relate to the administration of the estate because they deal with its winding up and with the management of the remaining funds in circumstances where the alternative would seem to be an lengthy and indeterminate delay, subject to the operation of s.184 of the Act. The Trustee should have his costs of that aspect of the proceeding paid out of the estate.
Surplus funds be paid to the Australian Financial Security Authority
In his 2 July 2021 affidavit the Trustee proposed that, as he has not been able to locate the respondent, upon an annulment pursuant to section 153A of the Act, he would pay any surplus in the estate to AFSA to hold until the respondent claimed it. That is an appropriate course under s.254(2)(a) of the Act.
CONCLUSION
There will be orders accordingly.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Cameron. Associate:
Dated: 21 September 2021
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